"We use information about key events in Germany relevant for wage negotiations, like labour strikes and the introduction of a minimum wage, to pinpoint changes in bargaining power between workers and employers. We find that such wage bargaining “shocks” are important drivers of unemployment and inflation, that their effect on wages is almost fully reflected in prices, and that they reduce the vacancy rate and increase firms' profits and the labour share of income in the short run, but not in the long run."

Support: Digital